Agarwal Jorawarmal v. Kasam

1. The plaintiffs sue as partners of a firm called Haji Tar Mohammad Ayub and Brothers. Originally the firm consisted of three partners. They executed a power of attorney (Ex. P-1) in favour of one Suleman Oomer who filed the present suit on the strength of that power. After this, but before the suit was filed, one of the partners, Haji Tar Mohammad, was declared an insolvent. Objection is taken to the continuance of this suit on the ground that the insolvency of one of the partners dissolved the firm and consequently the remaining partners had no authority to sue and also on the ground that the power of attorney given to Suleman Oomer was automatically terminated by the insolvency.

2. The suit was instituted on 29th July 1932. But the power of attorney on the strength of which it was filed was defective and the right power was not filed till 23rd September 1932. So it must be taken to have been instituted on the latter date. The Partnership Act did not come into force till 1st October 1932. Its provisions therefore do not apply to this case as such. Under the Act, it is clear that the insolvency of one of the partners dis, solves the partnership, but that was not the law before the Act came into force. 42 Cal 2251 at pp. 237 and 238 and Pollock and Mulla's Indian Partnership Act at p. 98, both point out that before the present Act came into force, the English law on this point was not in force in India and that under the Contract Act the insolvency of one of the partners did not of itself operate as a dissolution of the partnership.

3. If then the firm continued, it is obvious it had the right to transact business and to do all other matters necessary for that purpose.

4. One of these is naturally the filing of suits on behalf of the firm. Even under the present law, the mere fact of dissolution does not prevent suits being instituted in the name of the firm with respect to transactions which were entered into before the date of dissolution. Section 47 of the Partnership Act, which corresponds, with certain small alterations, to Section 263 of the Contract Act, is clear on that point. Mulla at p. 852 of his Code of Civil Procedure (10th Edition) also quotes a number of cases supporting that proposition. Similar remarks are to be found in Pollock and Mulla's Contract Act at p. 305 (Sixth Edition) with respect to the death of one of several partners. In all cases it is held that the surviving partners, or in the case of an insolvency the remaining partners, can continue the suit in the name of the firm.

5. It is argued on behalf of the defendants that O. 30, R. 1 of the CPC, indicates that a suit can be filed in the name of the firm by some of the partners only if the partnership is existing at the date of the filing of the suit. The argument has no force in view of the finding that the firm was not dissolved by reason of the insolvency of one of its partners. But even if it has been dissolved, the effect of dissolution is not to render the firm non-existent. It continues to exist for all purposes necessary for its winding up. One of these is of course the recovery of moneys due to it by suit or otherwise. As however I have held, the firm was not dissolved, it follows that two or more of the partners can institute the suit under O. 30, R. 1. 28 NLR 1162 supports this proposition.

6. The next argument refers to the power of attorney. It is urged that the insolvency of one of the partners has the effect of terminating the agency and 21 CWN 6203 is cited in support of this proposition. But at p. 626, Mookerjee, J. points out that the English cases cited there do not support the particular contention that where an agency has been created by two principals, the death of one of them terminates the agency not merely as regards himself, but also as regards his joint principal. He then states that the true rule is that in each case the Court must determine the true intention of the parties to the contract from the terms thereof and from the surrounding circumstances. In the present case the power of attorney has been signed by all three partners. Its recitals state that:

We the said Haji Tar Mohammad Ayub, Cassum Ayub and Hasham Ayub, partners in the firm of Messrs Haji Tar Mohammad Ayub and Brothers and on behalf of our said firm only do hereby nominate constitute….

7. It then proceeds to give Suleman Oomer power to take any legal action or proceeding in connexion with the said firm and to sign any plaint, etc., in respect of any Court case “on behalf of our said firm”. The only meaning I can deduce from this is that the partners intended Suleman Oomer to do these things on behalf of the firm so long as the firm continued, or of course until the authority was revoked. Since the firm has continued, I am unable to read any intention into that document that suits should not be filed on behalf of the firm, because one of the partners happens to have become insolvent.

8. The last point refers to a matter of limitation. As I have pointed out, the suit was improperly instituted in the first instance and as the correct power was not filed till 23rd September 1932, it must be taken to have been instituted on this date. It is urged that the suit, in so far as it relates to transactions more than three years before that date, must be taken to be beyond limitation. This is not a pure question of law. It involves facts as well. It would be necessary to determine when the transactions in suit took place. It would also be necessary to go into other matters such as the nature of the accounts and the like. The point was not taken in the lower Courts; and in fact, in the pleadings of 7th February 1933, after the correct power of attorney had been filed, the defendants confined their objection to goods purchased prior to 29th July 1929. In the circumstances I cannot allow the point to be raised at this stage. The judgment and decree of the lower Appellate Court are therefore right and the appeal is dismissed with costs.

A.L/R.K

9. Appeal dismissed.